California considers fee on sales of high GWP Gases

In its final Scoping Plan for achieving ambitious statewide emissions targets, California has increased the pressure towards a future phase out of high global warming gases. Once adopted, the plan could accelerate the use of alternatives to these chemicals, as seen already in other world regions.

Last week, the California Air Resources Board (CARB) published its final “Climate Change Proposed Scoping Plan”, a comprehensive document proposing a set of actions to reduce overall greenhouse gas emissions in the state. Compared to previous draft versions, the final version has added a recommendation to establish a fee on sales of gases driving global warming.

Rationale for the fee

The upstream mitigation fee will be complementary to other downstream regulations addressing specific applications of high Global Warming Potential (GWP) gases, such as specifications for future commercial and industrial refrigeration, changing the refrigerants used in automotive air conditioning systems, and ensuring that existing car air conditioning systems as well as stationary refrigeration equipment do not leak. The fee will:

Encourage the use and development of alternatives: The upstream mitigation fee on sales of high GWP gases will ensure that the climate impact of these substances is incorporated into their price. As seen in other countries, such as Denmark, this is likely to encourage the use of more sustainable alternatives, including natural refrigerants. This financial tool is considered to be a highly effective tool to minimize the use of high global warming gases in addition to legal restrictions.

Cover diverse applications: The fee will further address the fact that high GWP gases are used in many and diverse applications and that there is potential for new or evolving uses. Therefore, unlike other proposed measures that target specific applications of these gases, the fee will cover all current and potential future applications where such gases could be used.

Basis for the fee and use of revenues

The proposed fee will address high GWP gases in a consistent manner, i.e. on a carbon dioxide equivalent basis. The level of the fee would be set based on economic and technical evaluations. CARB estimates that, depending on the fee level, the annual revenue generated may range from $300 million to over $1 billion. The revenue could then be used to achieve cost-effective reductions of greenhouse gases (GHG) through GHG mitigation, investment in efficiency, research, development and deployment of green technologies and reductions in banks of ozone depleting substances.

Next steps

CARB will present all measures included in the Climate Change Proposed Scoping Plan to the board for approval at its meeting in December 2008. Provided that the upstream mitigation measure is approved at this meeting, a stakeholder process will begin in early 2009 to evaluate and develop further the sales fee.